NAME: _____________________________________________ DATE: ______________ CLASS: _________ STANDARD 3
LOANS and CAR PURCHASING
What do you need to get a loan?
Credit is the most________________ factor in a lender’s decision to grant a loan.
What is Credit?
FICO Score
FICO – Named for the score’s ________________, Fair Isaac Corporation.
FICO score ranges from 350 to 850.
Scores between 675 – 850 are considered ________________ credit.
Scores less than 600 are considered ________________ credit.
You can buy your score from one of the three major credit reporting companies:
E________________
E________________
T________________ U________________
How To Improve Your Score
Establish ________________ by obtaining some form of ________________.
Be ________________ and ________________!
Check credit ________________ often.
Keep debt in check.
Avoid ________________ inquiries.
Keep ________________ open.
Keep a healthy mix (mortgage, credit card, a car loan, and perhaps a ________________ card)
How Mistakes Affect Your Score
Five C’s of Credit
Capacity – annual ________________?
Character – will you ________________ the
loan?
Collateral – do you have ________________?
Capital – what are you ________________?
Conditions – what are the ________________
expectations and terms of the loan?
Debt-to-Income Ratio
Debt-to-income ratio measures the amount of debt you have ________________ to how much money you
make.
________________ or less: This is the ideal level of debt.
30% to ________________: Still credit worthy.
41% to ________________: Hard to get credit at this level.
________________ or more: GET HELP!!!
Calculate Debt-to-Income RatioDebt:
Monthly mortgage or rent ______
Minimum monthly credit card payments ______
Monthly car loan payment ______
Other obligations ______
Total monthly debt payments: ______
Income:
Monthly gross salary ______
Other monthly income ______
Total monthly income ______
Debt-to-Income Ratio:
Total debt ______ divided by total income ______
= ______
Get Pre-Approved
The best time to arrange________________ is before you go to the dealership.
Advantages of Pre-Approval
Gives you________________ and the upper-hand when negotiating a price at the dealership.
Ensures that you don’t buy more than you can afford.
Provides an opportunity to find the best ________________ rate available – rather than relying on dealers who
have may have a ________________ ________________.
Buying a Car
Things to avoid while shopping for a car:
Do not show ________________! Dealers take advantage.
Never buy a car in a hurry!
Do not give the salesman ________________ l.
Avoid being switched to a lease without doing your homework.
Do not trade in your car without knowing its ________________ in ________________.
Avoid financing ________________ at a ________________.
Consider Buying a Used Car
Benefits of Used Cars
Used cars do not ________________ as rapidly compared to new cars.
One year old vehicles are about 20-30% cheaper than ________________ ones.
Used vehicles are sometimes still covered by ________________ warranties.
You can trace the history of the car using the Vehicle Identification Number (VIN).
Some CU’s offer new car rates on used vehicles.
Buying Used
Have an ________________ mechanic check out a used car ________________ you buy it.
Ask questions – pay attention to road noise, ________________ , brakes, seating comfort, etc.
Order report on used ________________ from carfax.com
Using the Web
Web sites make car ________________ a little easier. Do your homework on sites such as KellyBlueBook.com.
Check online customer ________________ and safety ratings.
Web sites are good for ________________, but not necessarily for car ________________. Be careful, and only
deal with people you can ________________.
Auto Dealer Extras
Extended ________________
Fabric and ________________ Protection
Rust________________
Maintenance ________________
Ding ________________
________________ Insurance
Everything is Negotiable
Consider asking for all these “________________” for free…
You Can Always Buy “Extras” ________________ ________________
Extras at a car dealership are like extras at a movie theater…they are WAY ________________
Remember: You can always purchase extras from your bank, credit union, or insurance agent at about half the
cost!
Beware of “Bait and Switch” Tactics
It’s not unusual for dealerships to use “________________ and ________________” tactics to get consumers in the
door, only to find that what they thought was true, isn’t.
Things to watch for:
0% ________________
Manufacturer ________________
Outstanding ________________
If it sounds too good to be true, it most likely is…________________
Insurance
First time auto buyers usually overlook the cost of ________________ when purchasing a vehicle. It can be very
expensive. Sometimes your monthly insurance payment can ________________ your car payment.
Remember the following ________________ when shopping for a new car…
Insurance Coverage’s
Liability (________________) – covers bodily injury, and damage to property of others that you are found
liable for in an accident. Make sure you carry ________________ limits. The minimum coverage required by
the state is often too low. You are responsible for whatever your insurance company does not pay.
________________ (may be required by your lender) – covers damage to your vehicle, minus your
deductible.
________________ (may be required by your lender) – covers ________________ damage to your vehicle,
minus your deductible. For example, if you hit a deer or if your car is stolen.
Cost of Insurance
Here are a few factors that affect the cost of insurance:
1.
2.
3.
4.
5.
6.
Gender (males cost ________________ to insure)
Residence (some cities have more ________________)
Grades (you can get a good student ________________)
________________ of vehicle (sporty models cost a lot more)
Insurance ________________ and limits
Driving ________________
How to Decrease the Cost
Shop ________________.
Consider a ________________ deductible.
Drop collision and/or comprehensive coverage on vehicles worth ________________ or ________________
(check with your lender first).
Buy a low profile car.
Take advantage of discounts (low ________________, auto seat belts, airbags, multi-vehicle, no accidents,
driver training, good student, anti-lock ________________).
Monthly Car Budget
You should consider the following factors when planning a monthly budget for your vehicle:
________________
Oil ________________
M________________
I________________
________________ ________________